Supermarket Income Reit Plc · LSE:SUPR
Supermarket Income Reit — FY2020 Earnings Presentation
52 slides from Supermarket Income Reit's earnings presentation, September 2020
Slide 1: Results Presentation for the Year to 30 June 2020
INVESTING IN THE FUTURE OF UK GROCERY RESULTS PRESENTATION FOR THE YEAR TO 30 JUNE 2020
Slide 2: Agenda
Agenda Supermarket Income REIT Board of Directors Section Page 1 Highlights 3 2 Financial results 6 Nick Hewson Vince Prior Jon Austen Cathryn Vanderspar 3 ESG overview 17 Chairman Senior Independent Chair of Audit Independent Director Director Committee 4 Portfolio 21 Atrato Capital Senior Team 5 U
Slide 3: Highlights: market cap, portfolio, rent and total shareholder return
£521m 45 £389m Market cap (1) Store portfolio(2) Deployed (2) Dividend 100% 2.5% increased (3) Average rent In line with June Rents received increase(4) RPI (5) Total Shareholder Return 11.6% for the Period(6) 24.0% since IPO(7) (1) As at 28 August 2020. (2) Includes acquisitions to date inc post ba
Slide 4: Critical feed the nation infrastructure
Critical feed the nation infrastructure Grocery sales remain elevated Growth in online grocery Online grocery fulfilment 13% c.80% (1) (3) now online now fulfilled instore +8% versus versus Aug 2020 vs Aug 2019 grocery sales (1) 8% 74% (3) pre Covid (2) pre Covid (1) Kantar grocery 4 weeks to 6 Sep
Slide 5: Offer price of 104 pence per share, £400m pipeline
Offer price of Total pipeline Intention to raise greater than c.£150m 104 pence per share £400m 5 Image: Sainsbury's, Taplow
Slide 6: Financial results
Financial results • Income statement • Growth in rental income • Movement in EPRA NAV per share • EPRA metrics • Portfolio highlights • Bank financing • Activity to date • Debt financing overview • Sustainability • Thetford solar installation Image: Tesco, Newmarket 6
Slide 7: Income statement
Income statement Twelve months to Twelve months to 30-June-20 30-June-19 £m £m Rental income 26.4 17.2 Profit from joint ventures 0.5 0.0 Administrative and other expenses (5.2) (3.1) Finance costs (4.9) (4.2) EPRA Earnings 16.8 9.9 Dividend paid 20.0 10.9 Dividend cover 0.84x 0.91x EPRA cost ratio
Slide 8: Growth in rental income
Growth in rental income Components of rental income growth during the year 35.0 30.0 28.7 1.0 25.0 26.4 2.6 2.8 20.0 0.8 2.0 17.2 15.0 10.0 5.0 0.0 Rent received Annualisation Rent Preston Cheltenham Hessle acquisition Rent received Annualised rent 1 July 2019 effect reviews acquisition acquistion (
Slide 9: Income statement
Income statement Twelve months to 30-June-20 £m Rental income 26.4 Profit from joint ventures 0.5 Administrative and other expenses (5.2) Finance costs (4.9) EPRA earnings 16.8 Profit from joint ventures (undistributed) (0.5) Adjusted EPRA earnings 16.3 Dividend paid 20.0 Dividend cover 0.84x Adjust
Slide 10: Statement of financial position
Statement of financial position As at As at 30-June-20 30-June-19 £m £m Investment property 539.4 368.2 Investment in joint venture 56.1 - Cash and cash equivalents 20.3 9.9 Other assets 1.7 3.5 Gross assets 617.5 381.5 Borrowings (126.8) (143.7) Prepaid rents and other liabilities (13.5) (7.3) EPRA
Slide 11: Movement in EPRA NAV per share
Movement in EPRA NAV per share Components of EPRA NAV pence per share 105 3.5 (4.2 ) (1.8 ) 5.0 101 100 1.5 97 95 90 85 80 EPRA NAV 01 July Equity issue Property and JV Acquisition costs EPRA Earnings Dividend paid EPRA NAV 30 June 2019 premium to NAV revaluation 2020 less issue costs (1) Includes £
Slide 12: Portfolio highlights
Portfolio highlights(1) Twelve months to Twelve months to 30-June-20 30-June-19 EPRA NIY 5.0% 4.9% Proportion of portfolio exposed to inflation or fixed uplifts 100% 100% • Inflation-linked 91% 100% • Fixed uplifts 9% 0% • OMV 0% 0% WAULT 16 years 18 years (1) Includes Sainsbury’s Reversion Portfoli
Slide 13: Current bank financing
Current bank financing New banking relationship with Wells Fargo and DekaBank Facility Provider Running Expiry Term finance cost date to ➢ £137m new debt plus £100m accordion expiry ➢ 7-year term (1) £140m 1.73% Aug 2022 2 yrs Average finance running cost 2.0% £59m 2.50% July 2023 3 yrs Average debt
Slide 14: Deployment activity to date
Deployment activity to date £200m deployed during the year £189m deployed post balance sheet Sainsbury’s, Preston Sainsbury’s, Reversion Portfolio Waitrose, portfolio Tesco, Bracknell Sainsbury’s, Hessle Sainsbury’s, Cheltenham Morrisons, Telford Tesco, Newmarket (1) Includes Sainsbury’s Reversion P
Slide 15: Pro forma income statement - 12 months to 30 June 2020
Pro forma income statement - 12 months to 30 June 2020(1) Pro forma 12 months to Income 30-June-20 Rental income £38.7m Profit from joint ventures (undistributed) £5.8m EPRA earnings £31.0m Dividend cover (EPRA earnings) 1.13x Adjustment profit from joint ventures (£5.8m) Adjusted EPRA earnings £25.
Slide 16: Pro forma balance sheet as at 30 June 2020
Pro forma balance sheet as at 30 June 2020 Balance Sheet Pro Forma 30-June-20 Consolidated investment portfolio £784.4m EPRA net assets £465.2m Loan to value (1) 42.0% EPRA NAV per share 99 pence (1) Based on proportional consolidation & Sainsbury’s Reversion Portfolio less pro forma cash reserves o
Slide 17: Environmental, social and corporate governance
Environmental, social and corporate governance We want to make a positive contribution to the environment & society while generating a financial return for shareholders 17 17
Slide 18: Environmental, social and corporate governance
Environmental, social and corporate governance We are actively seeking ways to improve Appointed sustainability advisor Emperor to identify areas of improvement Developing a road map with Emperor to address any issues and to integrate sustainability into our decision making process Updates will foll
Slide 19: Sustainability
Sustainability Sustainability is at the core of our investment process All investments appraised on energy rating (EPC) Funding onsite green energy initiatives with our tenants Partnered with Evo Energy to deliver initiatives 19 19
Slide 20: Thetford solar installation – October 2020
Thetford solar installation – October 2020 Portfolio green energy progress Tesco Thetford – 370kWh Under technical Plans developed, evaluation, 31% 24% Finalised, 9% DNO approved, 36% 20
Slide 21: Portfolio
Portfolio • Portfolio growth since June 2019 • Tesco supermarkets • Sainsbury’s supermarkets • Morrisons supermarkets • Waitrose supermarkets • Indirect portfolio • Combined portfolio • Sainsbury’s Reversion Portfolio overview Image: Morrisons, Telford 21
Slide 22: Portfolio growth since June 2019
Portfolio growth since June 2019 30 June 2019 17 September 2020 Map key Tesco Sainsbury’s Morrisons Waitrose Sainsbury’s Reversion Portfolio 7 assets 45 assets £368m GAV £784m GAV(1) 22 (1) Includes Sainsbury’s Reversion Portfolio at book value of £56m as at 30 June 2020
Slide 23: Tesco supermarkets
Bracknell Cumbernauld Newmarket Bristol Scunthorpe Mansfield Thetford 23
Slide 24: Sainsbury's supermarkets
Telford Sheffield 24
Slide 25: Morrisons supermarkets
Sheffield Sudbury Sandbach Oundle Ely Edenbridge Eastbourne 25
Slide 26: Waitrose supermarkets
Preston Hessle Cheltenham Ashford 26
Slide 27: Sainsbury's Reversion Portfolio
OOO Sainsbury's Reversion Portfolio
Slide 28: Combined portfolio of 45 stores
Combined portfolio of 45 stores 19 directly owned stores Portfolio tenant split by valuation 26 indirectly owned stores 9% 10% 44% 38% £784m portfolio (1) Map key Tesco Sainsbury’s Morrisons Waitrose Sainsbury’s Reversion Portfolio (1) Includes post balance sheet events. Includes Sainsbury’s Reversi
Slide 29: Sainsbury's Reversion Portfolio
Sainsbury’s Reversion Portfolio 50:50 JV with British Airways Pension Trustees Limited JV holds 25.5% stake in a high quality Sainsbury’s Reversion Portfolio Stores are consistent with SUPR’s investment criteria Attractive returns profile Access to quality future pipeline assets Sainsbury’s Taplow (
Slide 30: Sainsbury's Reversion Portfolio
Sainsbury’s Reversion Portfolio SUPR and Sainsbury’s Reversion Portfolio store location map Reversion Portfolio details Store geographical distribution chart Yorkshire & Humberside, 4% East, 4% East Midlands, 7% West Midlands, 13% South West, 4% London & South East, 58% North West, 11% Store portfol
Slide 31: UK grocery sector
UK grocery sector • COVID-19 grocery update • Grocery sales growth • Delivery slot growth • Conclusion Image Sainsbury’s, Hessle 31
Slide 32: COVID-19 grocery sector impact
COVID-19 grocery sector impact COVID-19 impact on 2020 grocery market Phase one: Initial stockpiling Phase two: Shift of calorie spend to supermarkets Phase three: Limited socially distanced bar and restaurant openings. Impact of staycations Phase four: Inertia in return to “old normal” 32
Slide 33: UK grocery sales forecast
UK grocery sales forecast IGD forecasts 2019 -2022 (1) 220 +8% 211 210 Aug 2020 vs Aug 2019 209 207 grocery sales (2) 205 202 200 198 Grocery sales (£bn) 192 190 190 185 180 180 178 170 160 2015 2016 2017 2018 2019 2020 2021 2022 Pre-Covid grocery sales actual & forecast (£bn) Post-Covid grocery sal
Slide 34: Weekly delivery slot capacity
Massive increase in grocer delivery capacity (1) 1,600,000 13% c.80% +150% of grocery sales now now fulfilled 1,400,000 online (2) instore (4) versus versus 1,200,000 Weekly delivery slot capacity 8% 74% 1,000,000 Pre-Covid (3) Pre-Covid (4) 800,000 +61% 600,000 +76% 400,000 +40% 200,000 +167% - Tes
Slide 35: Long inflation linked income, mission critical last mile
Long inflation linked Mission critical last mile Asset backing from large income function flexible sites 35
Slide 36: Appendix 1: Financial
Appendix 1: Financial • EPRA metrics • IFRS to adjusted EPRA earnings • SRP – balance sheet • SRP – income statement 36
Slide 37: Appendix 1: EPRA metrics
Appendix 1: EPRA metrics As at As at 30-June-20 30-June-19 EPRA NAV per share 101 pence 97 pence EPRA Triple Net Asset Value (NNNAV) per share 101 pence 96 pence For the period ending For the period ending 30-June-20 30-June-19 EPRA EPS 5.0 pence 5.0 pence EPRA NIY 5.0% 4.9% EPRA cost ratio 19.7% 17
Slide 38: Bridge from IFRS to adjusted EPRA earnings
Appendix 1: Bridge from IFRS to adjusted EPRA earnings Twelve months to 30-June-20 £m IFRS earnings 32.8 Negative goodwill on joint venture acquisition (3.0) Changes in fair value of investment property (13.0) EPRA earnings 16.8 Profit from joint ventures (undistributed) (0.5) Adjusted EPRA earnings
Slide 39: Sainsbury's Reversion Portfolio – Balance sheet
Appendix 1: Sainsbury’s Reversion Portfolio – Balance sheet As at Acquisition date 30-June-20 27-May-20 Portfolio valuation (1) 900.7 900.7 Rent receivable 29.3 24.9 Bonds notional value (42% LTV) (4) (377.3) (377.3) Interest accruals & other liabilities(2) (108.4) (107.5) Book value 444.3 441.0 SUP
Slide 40: Sainsbury's Reversion Portfolio – Income statement
Appendix 1: Sainsbury’s Reversion Portfolio – Income statement SRP Total SUPR 12 month SUPR 1 month Twelve months to annualised share ownership 30-June-20 £m £m (1) £m Rental income 52.4 7.1 0.6 Expenses (0.4) (0.1) - Interest (7.3) (1.1) (0.1) Taxation (3.2) (0.4) - Profit after taxation 41.5 5.5 0
Slide 41: Appendix 2: General
Appendix 2: General • Key Terms • Share price performance • Portfolio metrics – direct • Portfolio metrics – indirect • ESG initiatives Image: Sainsbury’s Preston 41
Slide 42: Appendix 2: SUPR key terms
Appendix 2: SUPR key terms • UK listed REIT The Company • London Stock Exchange Main Market, Specialist Fund Segment Gearing • Targeted average leverage of 30-40% through the cycle IRR • Target IRR of 7 to 10% (1) Governance • An independent board of directors; compliant with the AIC Corporate Gover
Slide 43: Share price performance
Appendix 2: Share price performance Relative share price performance since IPO Trading volume – 4 week rolling daily average since IPO(1) 24.0% Total Shareholder Return(2) 720% increase in traded volume since IPO(3) 140 2000 130 1800 120 1600 110 1400 100 1200 90 1000 80 800 70 600 60 400 50 200 40
Slide 44: Directly owned portfolio data
Appendix 2: Directly owned portfolio data Passing Rent Valuation Yield Rent Review Store Size GIA Store Size NSA Property Tenant Valuation (£m) WAULT (Yrs) Rent Reviews Site Size (acres) (£m) (%) Floor-Cap 000, (Sqft) 000, (Sqft) Bracknell Tesco 39.5 2.4 5.7 10 Annual RPI 0% - 4% 73 47 7.3 Bristol T
Slide 45: Sainsbury's Reversion Portfolio data
Appendix 2: Sainsbury’s Reversion Portfolio data Passing rent WAULT Rent Store Size Store size Site Size Map # Property Argos Omni-channel (£m) (Yrs) Review (GIA 000, sq ft) (NSA 000, sq ft) (acres) 1 Alperton 2.3 3 Annual 1% fixed 85 62 6.2 Yes Yes 2 Alton 1.2 3 Annual 1% fixed 65 48 4.9 Yes No 3 A
Slide 46: Environmental, social and corporate governance
Appendix 2: SUPR: environmental, social and corporate governance ENVIRONMENTAL SOCIAL GOVERNANCE(2) Assets with Women in senior EPRA Best Practice Award environmental plan (1) 100% leadership roles (2) 40% Code of conduct Independent Board members 100% Our approved Thetford training (2) Yes solar ar
Slide 47: Appendix 3: Supermarket property market
Appendix 3: Supermarket property market • Supermarket property yields offer value • Supermarket property yields have decoupled from bonds • Supermarket leases offer one of the cheapest sources of RPI • Supermarket investment volumes Image Sainsbury’s, Hessle 47
Slide 48: Supermarket property yields offer value
Appendix 3: Supermarket property yields offer value Property net initial yields 2004 -2020 (1) 9.0 MSCI Net Initial Yields Jun 2020 Supermarkets 5.3% UK All Property 4.8% Distribution Warehouses 4.6% 8.0 7.0 6.0 5.0 4.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 49: Supermarket property yields have decoupled from bonds
Appendix 3: Supermarket property yields have decoupled from bonds Historical performance of supermarket property yields and Tesco corporate bonds (2033) (1) 7.0% 6.0% 5.0% Yield (%) 2.6% Spread 4.0% 3.0% 2.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Supermarket NIY
Slide 50: Supermarket leases offer one of the cheapest sources of inflation
Appendix 3: Supermarket leases offer one of the cheapest sources of inflation Historical performance of supermarket yields and UK index linked gilts (2037) (1) 7.0% 6.0% 5.0% 4.0% 3.0% 8.0% 4.3% spread spread Yield (%) 2.0% 1.0% 0.0% (1.0%) (2.0%) (3.0%) (4.0%) 2008 2009 2010 2011 2012 2013 2014 201
Slide 51: Supermarket property investment volume
Appendix 3: Supermarket property investment volume Supermarket transactions 2010 - 2020 (1) £2,000M £1,800M £1,600M £1,400M Total capital value £1,200M £1,000M £800M £600M £400M £200M £0M 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (YTD) (1) Colliers 2020 51
Slide 52: Strictly confidential disclaimer
THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, REDISTRIBUTED, COPIED OR PUBLISHED (IN WHOLE OR IN PART) TO ANY OTHER PERSON FOR ANY PURPOSE. ANY RECIPIENT OF THIS PRESENTATION AGREES TO KEEP PERMANENTLY CONFIDENTIAL ALL
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